Ahram Weekly

Canal corridor developments

The development of the Suez Canal Corridor is no less important to the Egyptian economy than the newly inaugurated canal itself, writes Sherine Abdel-Razek

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Al-Ahram Weekly

Egypt is in late-stage negotiations with investors from the UAE, France, Italy, Saudi Arabia and China to invest in the Suez Canal Area Development Project (SCADP), Ashraf Salman, the minister of investment, said earlier this week.

The investments cover more than 12 sectors, with an overall estimated total of $150 billion.

This is the most recent development in the SCADP since the master plan for its development was revealed at the Egypt Economic Development Conference (EEDC) held in Sharm El-Sheikh in March.

The project is a multibillion dollar plan to build a major industrial and logistics hub to provide maritime transport services around the canal. The Suez Canal is the fastest shipping route between Europe and Asia with 10 per cent of global trade and 20 per cent of container trade passing through the waterway. It brings in around $5 billion in revenues per year, a vital source of hard currency for Egypt which has struggled since the 2011 uprising that saw tourists and foreign investors fleeing the country.

The SCADP covers a number of locations within a 650 km square area and includes the cities of Port Said, Ismailia and Suez and six Mediterranean and Red Sea ports to put Egypt on the global supply chain map.

It will include investments in all kind of industries, from light to heavy, in addition to services like repairing ships, refueling, towing and rescuing, painting and cleaning, and loading and unloading.

Developments in the project since the EEDC also include introducing amendments to law 83/2002 for the special economic zones to allow for the establishment of an independent authority with full administrative powers to manage the projects in the Corridor in coordination with the Suez Canal Authority (SCA), Yehia Zaki, managing director of Dar Al-Handasah Egypt, the consortium which won the bid for the master plan of the project nine months ago, told Al-Ahram Weekly.

Dar Al-Handasah Egypt was founded in 1956 and is a leading international consultancy with 45 regional operations offices worldwide.

“The administrative structure of the new Authority is being determined,” Zaki said. In July, the government gave the Suez Canal Authority the power to set up joint stock companies in the area as a means to make investment there less bureaucratic and more attractive to investors

Dar Al-Handasah is currently working on detailed plans for each area, starting with East Port Said. “This includes developing the Port, the industrial and logistics area, and all the related utilities,” Zaki said.

The unique location of Port Said gives it advantages for trans-shipment activities, and it is being considered for containers and logistics. The development plan aims at increasing its capacity from three million containers per year to 10 million in a ten years’ time, making it within the top ten in the containers business worldwide

Maritime and port activities make up the core of the Project, which includes the six ports of East and West Port Said, Ain Al-Sokhna, Al-Adabiyah, Al-Arish and Al-Tor. The master plan focuses on developing East Port Said as a trans-shipment port and Ain Al-Sokhna as an international and domestic port and industrial centre.

The plan to develop the area is divided into phases, the first to end in 2030 and the second in 2050. There are three five-year plans to complete the first phase in which the development work in the three governorates and the ports will be taking place.

Dar Al-Handasah is also helping the SCA promote the projects by holding meetings with investors to explain the details of them. “In other words, we provide the Authority with the needed technical assistance,” Zaki said, adding that extending the needed infrastructure and setting up water desalination and sewage plants would cost $15 billion at the end of the three five-year plans.

The development of the ports and industrial facilities will cost an additional $40-50 billion. Both the private sector and the government will invest in the projects, with the former expected to pump in more investment. The projects are expected to offer one million job opportunities.

The idea of developing the area around the canal surfaced in 2008 but was shelved in 2010 because of the parliamentary elections.

In 2013, a plan to develop the canal was announced under former president Mohamed Morsi, but opponents accused him of attempting to sell public land to foreigners amid claims that Qatari investors were being given advantages in the region.

A Popular Front for the Suez Canal Corridor was formed to offer support and assistance as well as follow-up and close monitoring of the project. Ashraf Dewidar, founding member of the Front, said the canal was governed by the private economic zones law, which states that there should be three or four representatives from the private sector on the boards of such projects, even as it gives the representatives of different state bodies the upper hand.

“This extends the time for decision-making, as representatives from different ministries cannot make decisions independently and must consult related ministries,” Dewidar said.

“With such a managerial structure and bureaucratic administration, it will be a replica of the authority governing the development of the North-West Gulf of Suez Economic Zone, which is state-run with no involvement from the private sector. It has been a big failure as in 15 years it has developed only 3.3 per cent of the originally planned area,” he added.

Including executives from international trading companies as well as experts in marketing and project management on the board of the Authority would improve its performance, he argued.

However, the Front agrees with 80 per cent of the projects included in the Dar Al-Handasah plan. “We find the division of investments according to location, Suez for heavy industries, Port Said for light industries, and IT in Technology Valley in Ismailia, doable. Also the selection of the main five industries to start with, namely ships, cars, textiles, food industries and IT, is good,” Dewidar said.

But he had reservations about the limited attention given to the maritime and shipping industries compared to other industries. Egypt has no share in the ship-building industry, which has an overall value of $410 billion, despite the fact that it spends billions of dollars per year to transport exported and imported goods.

Egypt spent $7 billion on transporting imports and exports in 2012, the bulk of which was on foreign vessels. The Industrial Development Agency has published a study on developing the shipping industry, giving it revenues of $8.7 billion and creating 100,000 jobs.

“The one million job opportunities expected to be created by 2030 is too conservative in regard to the number of newcomers on the job market,” Dewidar also said. He added that the government’s decision to increase taxes on projects in the Corridor from 10 to 22.5 per cent had stirred fears that it might limit its appeal as an investment destination.

However, Zaki said that “the strategic location, together with other investment incentives, makes the area a promising investment destination.”

Dewidar argued that tax incentives were no longer the main determinants in investment decisions as the ease of doing business and smooth exit procedures were now more important.

“But we lack those factors as well. We need to change the way we manage our projects and plan for them properly. Otherwise, we will lose a great opportunity for economic growth,” he said.

The World Bank’s Doing Business Report 2015, which measures the ease of starting up a business and exiting from it, ranks Egypt at 112 out of 189 countries worldwide.

The promise of Technology Valley

THE NEW SUEZ CANAL has raised hopes of new high-tech areas and electronics factories, heightened by an announcement from the Ministry of Communications that LE13 to LE15 billion will be invested in the development of infrastructure for the Canal Corridor.

Three major communications and information technology projects are on the table, according to official statements. One is an international logistics zone that will serve as a springboard for Middle Eastern and African markets. Another is an international Internet services centre, and a third envisions a Technology Valley to the east of the canal that will stimulate the high-tech, computer-programming and modern electronics industries.

Of the three, the Technology Valley is the only one to have been approved for inclusion in the Suez Canal Corridor projects thus far, according to official sources who stress that it will create thousands of job opportunities for young people and represent a qualitative shift in the country’s precision industries. After the inauguration of the New Suez Canal, a meeting will take place between the Suez Canal Authority and the Dar Al-Handasah engineering firm in order to agree on the broad outlines of the project.

“Sturdy infrastructure for the transmission of information and the provision of high-quality voice and Internet services is essential to creating any industrial zone, especially a high-tech one,” said Minister of Communications and Information Technology Khaled Negm, who added that the ministry was helping to furnish the Suez Canal Corridor with communications infrastructure including the fibre optic cables necessary for high-speed Internet services.

“All projects in this area will be carried out in partnership with the private sector and civil society,” Negm said, explaining that the area would become “a centre for assembling technological products and distributing them overseas” as a route towards further technological expansion. Areas abroad have acquired considerable expertise in this domain, the minister said, including the Jebel Ali area in the UAE, adding that it was important that the Suez Canal Corridor develop a logistics area offering complementary and support components for the industry.

“The opening of the Technology Valley in the Suez Canal Corridor will stimulate a range of communications services, among which will be cloud computer applications, call centre services, and GPS electronic mapping systems to serve the international navigation agencies,” Negm said.

Reported by Shaimaa Shalabi

Seven undersea tunnels

AN INTEGRAL part of the project is to connect the Sinai Peninsula to the Egyptian mainland by a network of seven underwater tunnels. They include three car tunnels in Port Said and Ismailia and one for railways in each governorate. Another tunnel for utilities and services will be dug in Ismailia.

Half of the budget for expanding the canal was allocated for building the tunnels. The state-owned Arab Contractors Company and the private Orascom Construction Industries, working under the supervision of the Armed Forces Engineering Authority, began the tunnels in May by choosing the locations of their entrances and exits.

Engineers and technicians were sent to Germany and France for training on using the equipment used to dig tunnels, which is being imported. The only tunnel that currently links Sinai to the other Egyptian governorates is the Ahmed Hamdi Tunnel, an automobile tunnel under the Suez Canal inaugurated in 1981.

Investing in Fisheries

WHAT is being described as the “largest fish farm” in the world is underway in the Suez Canal Zone, with 3,828 fish basins at an infrastructure cost of LE650 million ($83 million), the Minister of Environment Khaled Fahmi told MENA on Friday.

The project is located on 5,000 feddans of land and will focus on the production of bass, bream and meagre, which will be exported as well as used in the local market.

A total of 1,380 basins will operate on the inauguration of the New Suez Canal this week, and all the basins will operate by August 2016. It is expected that the project will cover its expenses in three years.